diff --git a/python/src/agent_squad/utils/tool.py b/python/src/agent_squad/utils/tool.py
index 46e9e670..c66df508 100644
--- a/python/src/agent_squad/utils/tool.py
+++ b/python/src/agent_squad/utils/tool.py
@@ -304,11 +304,13 @@ def _get_tool_use_block(
         return None
 
     async def _process_tool(self, tool_name, input_data):
+        tool = next((tool for tool in self.tools if tool.name == tool_name), None)
+        if tool is None:
+            return f"Tool '{tool_name}' not found"
         try:
-            tool = next(tool for tool in self.tools if tool.name == tool_name)
             return await tool.func(**input_data)
-        except StopIteration:
-            return f"Tool '{tool_name}' not found"
+        except Exception as e:
+            return f"Error processing tool '{tool_name}': {e}"
 
     def to_claude_format(self) -> list[dict[str, Any]]:
         """Convert all tools to Claude format"""
diff --git a/python/src/tests/utils/test_tool.py b/python/src/tests/utils/test_tool.py
index c0f57be6..0ba1e5c1 100644
--- a/python/src/tests/utils/test_tool.py
+++ b/python/src/tests/utils/test_tool.py
@@ -473,14 +473,25 @@ def test_tool_with_properties():
 
 @pytest.mark.asyncio
 async def test_tool_not_found():
-    try:
-        tools = AgentTools([AgentTool(
-            name="weather",
-            func=fetch_weather_data
-        )])
-        await tools._process_tool("test", {'test':'value'})
-    except Exception as e:
-        assert str(e) == f"Tool weather not found"
+    tools = AgentTools([AgentTool(
+        name="weather",
+        func=fetch_weather_data
+    )])
+    result = await tools._process_tool("test", {'test': 'value'})
+    assert result == "Tool 'test' not found"
+
+
+@pytest.mark.asyncio
+async def test_tool_processing_error():
+    async def failing_tool(value: str):
+        raise ValueError("boom")
+
+    tools = AgentTools([AgentTool(
+        name="failing",
+        func=failing_tool
+    )])
+    result = await tools._process_tool("failing", {'value': 'x'})
+    assert result == "Error processing tool 'failing': boom"
 
 
 def test_get_tool_use_block():